Mexico Unlikely to Recover Growth Before 2027: IMF

Mexico will probably not reach the same levels of growth seen prior to the pandemic until 2026 or 2027, IMF has predicted.

Director of the Western Hemisphere Department Alejandro Werner said that while factors like the success of vaccinations campaigns and the development of trade between Mexico and the US’ new government could speed up recovery, long-term growth must be based on sustainable actions, El Economista reports.

If the US fiscal package agreed upon towards the end of December proves useful in kickstarting the US economy, there will be a beneficial consequence for Mexican growth too, Werner said at ITAM's Annual Economic Outlook Seminar.

According to Proyectos Mexico, a government run website that offers investment information on projects in the country, the economy shrank 8.6 percent from 1Q20 to 3Q20 and by 0.1 percent in 2019.

The IMF currently predicts growth of 3.5 percent for Mexico this year. However, Werner issued caution on the recovery and emphasized that the natural rebound should not be mistaken for a leap forward in economic development. “It must be made clear that this is a statistical rebound due to the low base of comparison that the GDP will have with respect to the contraction of 2020,” he said. “"The important thing here is not to confuse this rebound and effect of the external locomotive as a sign of structural improvement of the economy.”

Among the concerns that the IMF has is the “mediocre investment environment” that will make job creation difficult, El Economista said. In April, President Andrés Manuel López Obrador promised that the National Development Plan would generate around 2 million jobs in nine months via the implementation of various initiatives and projects, including the president’s flagship projects like the Dos Bocas Refinery and the Mayan Train.

But this week, IMSS reported figures showing the loss of 646,000 jobs in the country’s formal sector in 2020. In December alone, 277,000 jobs were lost, reported El Financiero. The informal labor sector, mostly made up of small businesses like street food stands, generally suffers higher job losses during recessions though exact job losses are not known.